The safeguard duty was levied by the Directorate General of Trade Remedies, acting on a complaint by local manufacturers that imported equipment was causing their business 'serious injury'.

About 500 MW of solar modules were manufactured in India every quarter, which rose to 650-700 MW after the duty was imposed, according to data collected by solar consultancy Bridge To India.

The 25% safeguard duty imposed on imported solar components, meant to support domestic manufacturers, has not done cell producers any good, although module makers have fared better.

“We’ve got zero orders since the duty became applicable,” said the chief executive of a solar cell company, requesting anonymity. “Our factory is still shut. We are surviving with great difficulty.” Solar cell manufacturers said even with the duty, their products remained more expensive. They had suggested a safeguard duty of 70%, but following an uproar by developers, the duty was reduced to 25%.

“If you require a certain price to break even, raising the competition’s cost to half of that doesn’t help,” said Dhruv Sharma, chief executive of cell manufacturing company Jupiter Solar. “We are operating at 40% capacity. If things don’t improve soon, we will definitely be heading to the National Company Law Tribunal (declaring bankruptcy).”

With safeguard duty, the cost of an imported solar cell is about 12 cents. Indian manufacturers are being forced to sell at that price, too, though their input cost is 13.5 cents per cell.

About 90% of panels and modules used in Indian solar projects are imported because they are cheaper.

The safeguard duty was levied by the Directorate General of Trade Remedies, acting on a complaint by local manufacturers that imported equipment was causing their business “serious injury” and they were unable to compete with Chinese and Malaysian rivals on price.

The imposition of the duty at the end of July sparked strong objections from project developers who claimed it would increase tariffs and impede India’s drive towards achieving its goal of 100,000 MW of solar capacity by 2022.
The safeguard duty was set for two years – in any case not more than three – and was expected to spur investment in local solar cell manufacturing, enabling achievement of scale that would help compete with global counterparts. But there have been no new investments. “When you invest in manufacturing capacity, it’s a big investment which is expected to pay off over time. A two-year declining duty is not enough to do that,” said a rooftop developer who did not want to be identified.

However, domestic manufacturers of modules with imported cells have fared better after safeguard duty. Locally made modules cost 25-27 cents per piece and after the imposition of the duty, Chinese modules cost the same.

“Indian module manufacturers are more competitive on price now than they were before the duty came. We source modules from China, South East Asia and India. We find there’s no clear winner on price anymore,” the rooftop developer said.

About 500 MW of solar modules were manufactured in India every quarter, which rose to 650-700 MW after the duty was imposed, according to data collected by solar consultancy Bridge To India.

“Because of exchange rate volatility, many small developers prefer to lock their costs upfront rather than sign their contract in dollars not knowing what they will ultimately have to pay. Hence, the smaller developers now prefer to buy Indian modules,” said Vinay Rustagi, Managing Director of Bridge To India.

Module manufacturers are still not fully satisfied. “We are optimising our investments, making our modules more competitive, improving the product portfolio, but we are not planning any large investments till the government gets serious about improving the financial situation of the Indian manufacturers,” said Gyanesh Choudhary, chief executive of module manufacturer Vikram Solar.

They also worry the duty has been imposed for too short a period. The commissioning deadline for most auctioned solar projects is about 24 months.

“Developers who win projects today won’t buy modules till close to the commissioning date, by which time the duty will have fallen to just 15%. There is no incentive for developers to buy from us now,” said a module manufacturer on condition of anonymity.

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